Shares on TomTom Plummet on Cautious 2008 Outlook

Dutch navigation device maker TomTom roughly doubled its device sales in the fourth quarter and its gross margin fell less than expected even as it expanded its share in the competitive U.S. market.

But shares fell 9.3 percent Thursday as analysts called the company's 2008 outlook conservative.

TomTom said on Thursday earnings before interest and tax rose 8.3 percent from the third quarter to 144 million euros ($211.9 million), above the average forecast of 138 million euros given in a Reuters poll of 14 analysts.

The Amsterdam-based company sold 4.3 million navigation devices, up from 2.2 million in the third quarter and 1.9 million a year ago, for revenue of 634 million euros.

Analysts on average had expected revenue of 655 million euros.

Its gross margin dropped to 42.3 percent from 48.8 percent in the third quarter, but came out above the average analyst forecast of 40.3 percent as TomTom said it had seen "reasonable pricing" and good control over its bill of materials.

The closely watched average selling price fell to 141 euros from 184 euros in the third quarter.

"A large proportion of our revenue is in the United States where pricing conditions are slightly more aggressive than in Europe, but nevertheless we managed to keep that 42 percent number," TomTom Chief Executive Harold Goddijn told journalists on a conference call.

TomTom said it had boosted its U.S. market share -- where rival Garmin is market leader -- to 27 percent in the fourth quarter from 22 percent in the third, but missing its 30 percent target.

In Europe, TomTom seeks to maintain its market-leading share at 50 percent.

For 2008, TomTom forecast sales of 14 million to 15 million devices and revenue of 2.0 billion to 2.2 billion euros.

It sold 9.6 million devices in 2007 for revenue of 1.74 billion euros.

TomTom said it continued to believe the European Union would approve the 2.9 billion euro takeover of digital map maker Tele Atlas, adding it hoped to have more clarity by the end of March.

TomTom's shares have fallen more than 35 percent over the past three months as the Tele Atlas takeover is still pending before regulators and because of concerns about the impact that a slower economy may have on consumer spending.

Goddijn said the company had not seen any macro-economic impact on its business, adding: "The early indications for January again are that demand is strong and growth is strong in the European market."

TomTom shares fell more than 2 percent on Wednesday after Garmin warned that intense competition could cut prices by about 20 percent in 2008 and squeeze margins.